Second, China’s overall defense industrial base is flourishing. During the recent Sino-Indian military engagement in the Himalayas, reports surfaced that its J-10C aircraft had shot down five Indian jets, generating a lot of buzz. The multilateral incident included not only Indian but also French-made Rafales and Russian-sourced MIG-29s and Su-30s. As a consequence, shares of Chinese defense manufacturers have skyrocketed. Avic Chengdu Aircraft Co, maker of the J-10C, saw its stock price jump by 20% on Monday. Much of this spike was driven by speculation surrounding the aircraft’s use in combat.
China’s defense industry now constitutes 5.9% of global arms exports. It has become a central node in the worldwide illicit arms trade, providing over a quarter of West Africa’s weapons. By contrast, the United States leads the world in arms exports, with a 43% market share — the only real comparison to their non-compliance. NEW ORLEANS—Recent advancements in all areas of China’s military capabilities have created a buzz. Global funds are scrambling to recalibrate their investment strategies looking for ways to seek geopolitical hedges.
Of all the J-10C’s reported performance, this has been the most remarkable, as it allegedly fought against Western aircraft for the very first time. Pakistan’s military claims their Chinese-made jets downed the Indian aircraft. As yet, India has not backed these assertions up with evidence. The dangers of these events extend well beyond regional tensions. They potentially stand to play a far larger role in global defense markets, as shown by the recent spike in European defense stocks. Companies such as Dassault, Rheinmetall, and Hensoldt have benefited from increased NATO budgets and a perceived reduction in U.S. global policing.
Beijing, it seems, has done just that with this latest engagement, thus creating an unprecedented advertising opportunity for its defense exports. The war video of this clash highlights the outstanding effectiveness of the J-10C. This piece of evidence goes a long way in solidifying China’s position as an emerging rising competitor on the global arms market. Though observers still urge caution, the J-10C is proving to be popular. So far, it has not faced off against one of the most advanced U.S. fighter jets, the F-35, F-22 and F-15EX Strike Eagle II in combat.
China’s defense industrial base has long been a step behind its U.S. and European peers. Nonetheless, the recent incidents suggest a turning point as the country seeks to enhance its military reputation and market share. Fifth, international tension is raising the stakes for defense spending. This means that both China’s mil-ind complex and global defense funds will be more interesting, more appealing and thus more investable.